The Street appears to be reassessing its reaction to Masimo’s plans to spend $1.025 billion to acquire Viper Holdings, the parent company of Sound United.
The news of the acquisition plans on the evening Feb. 15 caused the patient monitoring tech company’s stock to lose a third of its value the next day. While MASI shares are still down more than 29% over the past five days on the Nasdaq as of this morning, the company’s stock has recovered a bit since the initial fall.
Analysts appear to be gaining more perspective over Masimo’s plans to acquire the company behind high-end sound system brands including Bowers & Wilkins, Denon, Polk Audio and Marantz.
“While we understand investors’ consternation over the Sound United deal, we believe that the sell-off was overdone and note that we expect the deal to be highly accretive to EPS, and we believe that investors get a free call option on MASI’s consumer pipeline,” Mike Matson, senior research analyst at Needham & Co. wrote in a note today.
Matson upgraded MASI from a Buy to a Hold. He noted that the expansion of oximetry into lower-acuity settings could also drive growth at Masimo. Plus, Masimo could receive significant royalties if it wins its patent infringement complaint against Apple that’s before the International Trade Commission. The ITC could decide by early 2023 whether Apple improperly used Masimo health-monitoring IP in its Apple Watch, according to Matson.
Masimo officials are expected to elaborate on the strategy behind the Sound United acquisition later this year. But even as Masimo’s stock was falling on Feb. 16, MassMEDIC President Brian Johnson noted on LinkedIn that the reasoning behind the deal seemed obvious to him.
“I think it’s a wearables play for a company that needs more opportunities to put its sensors into use on the consumer side,” Johnson said. “The ear is a perfect diagnostics hub, and we all wear our headphones all the time.”